Podcast Summary

How I Invest with David Weisburd

Episode 260: How Founders Access Liquidity in Pre-IPO Companies
Guest: Philip (Colson Equity Financing)
Date: December 11, 2025

Overview

In this episode, host David Weisburd interviews Philip, founder of Colson Equity Financing, about innovative liquidity solutions for founders and executives at late-stage, pre-IPO companies. The discussion covers the genesis of Colson's model, its connection to the guest’s real estate background, comparisons with secondary markets, investor risk-return profiles, and why structured liquidity remains a niche despite a massive addressable market. The episode is filled with practical investor insights, memorable personal anecdotes, and thoughtful advice for both founders and allocators.

Key Discussion Points & Insights

1. Background and Genesis of Colson’s Model

• Philip’s Real Estate Roots and Financial Crisis Lessons

  • Family history in real estate over four generations.
  • Sold family portfolio right before the 2007 crash, unlocking liquidity.
  • Pivoted from illiquid reinvestment into exploring private alternatives, starting with fund investments and evolving to directs.
  • Quote [00:14]:
    “We actually were lucky enough to sell our real estate portfolio in late 2007, right before the real estate market blew up. That really allowed us to get a lot of liquidity ... and start investing in other things than just real estate.” — Philip

• Opportunity Recognition in Venture

  • Saw post-crash parallels between distressed real estate buying and opportunities in late-stage venture equities.
  • Early encounter: funded a partner's option exercise in exchange for future upside, seeding Colson’s signature financing structure.

2. The Problem: Liquidity for Founders & Executives

• The Founder/Executive Dilemma

  • Rich on paper, but cash poor.
  • Forced to sell at discount in secondaries, or take risky loans, or pay large tax burdens with no liquidity.
  • Options often expire within 90 days of leaving a company; exercising and covering associated taxes can be infeasible.
  • Quote [05:07]:
    “In 2021 it was too frothy and everything came crashing down in the venture growth space... So we had people who were very rich on paper and couldn’t get access to liquidity.” — Philip

• Colson’s Solution

  • Offers non-dilutive liquidity: covers the strike price & tax, collateralized by shares, aligns upside.
  • Functions like a “cash-out refi” for shares—unlocking current value without giving away future upside.
  • Especially impactful when tax and capital gains timing is optimized.

3. Investment Structure & Value Proposition

• Downside Protection & Upside Sharing

  • Capital advanced is collateralized 3-4x by equity; investors have strong downside protection.
  • In up scenarios, the founder/executive shares upside; structure is less lucrative if the company’s growth is exponential but attractive when outcomes are flat-to-moderate.
  • Quote [07:27]:
    “My partner likes to say... we just have to hit the side of the barn door. We have so much downside protection. As long as we can underwrite against failure, we can account for valuation risk really, really well.” — Philip

• When Structure Beats Secondaries

  • Ideal for investors confident in downside but realistic about moderate upside (<3x).
  • Not always preferable for 10x outcome scenarios—then direct investing/secondaries make more sense.

• Portfolio Construction and ‘Structural Alpha’

  • Emphasis on diversification across companies and industries to absorb binary failures.
  • Returns: targeted 2x multiple and 20–30% IRR, even in flat or slightly down exits, via structured equity financing vs. traditional venture.
  • Quote [18:16]:
    “You... said Colson, you guys have structural alpha. I loved it because...we can show you with the math that we have structural alpha.” — Philip

4. Market Growth, Challenges, and Outlook

• Why Isn’t This Mainstream Yet?

  • The overall secondary market is now larger (by dollar volume) than IPOs, but nuanced structures are still niche.
  • The model is “niche within a niche”—smaller, bespoke deals rather than massive bank-driven tenders.
  • Quote [25:39]:
    “Pre-exit liquidity solutions are already an asset class... From June 2024 through June 2025, there was more liquidity generated from secondaries than from IPOs.” — Philip

• Barriers to Scaling

  • Fragmented market (many small deals vs. large, easily scalable transactions).
  • Necessity of continuous education—the product is not always immediately understood by investors or stakeholders.
  • Institutional inertia: large LPs wait until Fund 3 or 4, new structures require “career risk”.

• Future Outlook

  • Growing pool of companies staying private longer, increasing liquidity needs.
  • Viral, “sticky” nature within firms: one founder’s deal leads to more.
  • Market expected to continue expanding, with Colson and similar strategies carving out larger share.

5. Risk Considerations

• Key Risks

  • Underlying company failure (collateral goes to zero).
  • Protracted time to liquidity/eventual exit.
  • Returns are structured to incentivize timely exits (cost increases the longer it takes).

• Mitigants

  • Portfolio approach (industry and company diversification).
  • Investor/founder alignment—optimally structured for those believing in their company’s upside.

6. LP & Market Feedback

• Positive Polarization

  • Some LPs “love it”—appreciate the math, downside protection, and access.
  • Others hesitate due to learning curve and lack of track record (especially with Fund 1/A).
  • Typically easier to convince founders/executives than end investors.
  • Quote [31:59]:
    “As soon as you ask somebody to learn something new... there’s people who really love that and a lot of people who go, ‘I don’t know.’ ... So we need to spend some time in education on both sides.” — Philip

• Building Relationships and Trust

  • The importance of the long game with investors: growing relationships, educating, and building track record.

7. Personal & Strategic Guidance

• Advice From the Guest
  • Keep executing and educating—treat fundraising and market-building as inevitable, long-term processes.
  • Prioritize industry and company diversification “even if you’re a specialist.”
  • Building and maintaining deep, direct relationships is more effective than cold outreach.
  • Quote [38:19]:
    “You’re only as strong and only able to close capital as far as your, either direct or through one degree of separation, relationships are strong.”

Notable Quotes and Memorable Moments

Early Lessons from Real Estate

“We’re going to own them for cheaper than anyone else can ever build them for again. And so it’s just a matter of time before those valuations recover.” — Mentor's advice to Philip, [01:45]

On the Opportunity in the Current Market

“When we’re able to recreate a company for 10, 20, 30 cents on the dollar by using structured finance ... we could unlock doing opportunities and deals in a variety of industries.” — Philip, [05:07]

The Power of Structured Alpha

“We can perform horribly ... and still deliver a 1.5x and a double-digit IRR. How is that possible? ... Flat exits and 50% down exits aren’t failures for Colson.” — Philip, [18:38]

On the Behavioral Economics of Founder Choice

“If someone turns us down and takes the secondary, I go, great, we didn’t want to do that deal. They don’t believe in the upside.” — Philip, [16:32]

On the Difficulty of Industry Adoption

“It’s not immediately obvious... So we need to spend some time in education on both sides.” — Philip, [31:59]

Family Office Wisdom

“After you grow something, at some point you need to harvest... I would argue that you need to find new seeds to plant.” — Philip, [41:39]

Important Timestamps

• [00:14–02:00] — Philip’s background, real estate exit, first investments
• [05:07–07:10] — Market crash, upside of structured liquidity
• [08:03–09:30] — Problems for founders, executives, and how Colson’s model helps
• [11:39–14:25] — Trade-offs for investors, value of equity financing structures
• [18:16–19:55] — “Structural alpha,” portfolio models, stickiness within companies
• [25:39–27:56] — Secondaries vs. IPO liquidity, niche status, TAM
• [30:05–31:48] — Key risks, structuring deals for exits, flexibility
• [31:59–33:32] — LP education, investment barriers, and long-term thinking
• [36:46–38:19] — Advice on relationships and portfolio construction
• [41:39–42:07] — Family office analogy: seed, plant, and harvest

Final Takeaways

• Colson’s structured liquidity model is tailored for late-stage private company founders and executives seeking non-dilutive, tax-optimized access to their paper wealth.
• With strong downside protection and aligned upside, the model suits both investors targeting high risk-adjusted returns in “fat part of the bell curve” outcomes and founders desiring to keep skin in the game.
• The segment is poised for growth but remains education- and relationship-intensive, requiring ongoing evangelism and nuanced understanding from both allocators and portfolio company leaders.
• Relationships, industry diversification, and a willingness to play the “long game” are central to success in new investment strategies—both for allocators and entrepreneurs.

For deeper details or a particular segment, refer to the timestamps provided above.